The Securities and Exchange Commission has filed a complaint in the Southern District of Florida against Reign Financial International, its CEO Giorgio Johnson, COO Gary Mills, and Miami resident Patrick Allen, alleging a $26 million investment fraud scheme that operated from March 2021 through October 2022. According to the SEC, the defendants raised over $26 million from at least 31 investors through three fraudulent high-yield investment programs: the Compass Program, the PBL & 5Js Program, and the Reign Program. None of the funds were invested in any legitimate program, the agency claims.
The programs exhibited classic hallmarks of a prime bank scheme, promising investors that their principal would be safely held in custodial or hedge fund accounts and would generate weekly returns of 75% to 125% within weeks. One investor was promised a 300% monthly return on a $20 million stake. The SEC asserts these promises were never intended to be fulfilled.
For financial advisors and compliance professionals, the case highlights the alleged misconduct at Berone Capital, a state-registered investment adviser with active registrations in Georgia, North Carolina, and Texas during the relevant period. Berone reported just over $4 million in assets under management on its June 9, 2023 Form ADV and had two employees—Jeremiah Beguesse and Fabian Stone—who owned the firm entirely. Berone managed the Berone Capital Fund, LP, a private hedge fund used to hold investor money for two of the three programs. The SEC separately charges Berone, Beguesse, and Stone with misappropriating fund assets and breaching their fiduciary duties as investment advisers.
Within days of a $20 million wire transfer landing in the fund's account, the SEC alleges Berone began moving money out. Before the wire, the fund's cash balance was approximately $260,000. The agency claims Berone used roughly $850,000 of that money to purchase corporate bonds naming Beguesse and Stone as beneficiaries, and spent additional funds on two luxury cars (with a memo line referencing a Rolls-Royce), Atlanta Hawks tickets, private jet travel, and jewelry. Another $30,000 allegedly went to Beguesse's girlfriend for a car purchase.
The due diligence practices at Reign were equally troubling. The SEC says the firm's vetting of program providers typically consisted of little more than an internet search. Reign did not run background checks, confirm track records, or speak with the banks that supposedly operated the trading platforms. Yet it sold investors on carefully crafted financial strategies and trade platforms it did not actually have.
Undisclosed conflicts also emerged. Beguesse and Allen were friends and members of the same fraternal organization, and Beguesse had previously served as Allen's financial advisor at another broker-dealer. Between June and November 2021, Allen gave Beguesse and Berone roughly $350,000 in gifts, some of which, the complaint says, came from money Allen had misappropriated from the Compass Program.
Mills, Reign's COO, previously served a three-year jail sentence from 2005 to 2008 for conspiracy to commit bank fraud in connection with a mortgage loan scheme and lost his law licenses as a result, the SEC says.
The SEC charges the Reign defendants and Allen with violations of Sections 17(a)(1) and (a)(3) of the Securities Act and Section 10(b) of the Exchange Act and Rules 10b-5(a) and (c) thereunder. Reign, Johnson, and Mills also face aiding-and-abetting claims tied to Allen's violations, and Johnson is separately charged as a control person under Section 20(a) of the Exchange Act. The Berone defendants are charged with violating Sections 206(1) and 206(2) of the Investment Advisers Act. The SEC seeks permanent injunctions, disgorgement, civil penalties, and an officer-and-director bar against Johnson. This case echoes other recent frauds, such as the conviction of GWG and Beneficient ex-chairman Bradley Heppner in a $1B securities fraud scheme, and underscores the need for rigorous due diligence, as highlighted in the rising demand for integrated wealth advice.
